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Open to the Uninsurable

by Joe Sullivan

When Kathy lost her job as a bookkeeper in 1997, she was able to keep her health insurance for 18 months at her own expense under COBRA. Meanwhile, she got a new job at a small company that didn't offer any benefits. After her COBRA coverage had run out, Kathy sought to get insurance on her own. While she hasn't had any complications, Kathy is a diabetic, and she was unable to obtain any kind of individual coverage at any price.

Except for a safety net afforded by TennCare, this 47-year old single woman would have been exposed to any medical misfortune that might befall her. Because she was uninsurable, as evidenced by a letter from an insurer declining to cover her, Kathy qualified for TennCare at a monthly premium of $116 based on her $22,000 annual salary.

Now, however, TennCare is seeking to close the uninsurable window through which Kathy got protection. Fortunately for people facing similar circumstances, the state's plan to deny them coverage is subject to federal approval. And such approval from the Health Care Financing Administration, which picks up close to two-thirds of the total tab for TennCare, has not yet been forthcoming. Nor should it be—any more than the state should have overreacted in this manner to its admittedly severe TennCare problems in the first place.

No one should understand this better than TennCare's director, Brian Lapp. When faced with similar circumstances himself a few years back, Lapp got his entire family enrolled in TennCare for a premium of $579 a month, and he acknowledges that he's very thankful for the coverage afforded.

Now, however, he's fixated on the abuses, bumbling, and over-generosity that have contributed to TennCare's escalating costs. Indeed, he can rail about them at any length. People with AIDS, muscular dystrophy, and multiple disabilities are moving to Tennessee just to get on the rolls. Employers are inducing workers with high cost conditions to get off their corporate health plans and onto the state's. TennCare's own administration has failed to verify the eligibility and income levels of its 1,300,000 enrollees, especially on an ongoing basis. The program's failure to impose any deductible or co-payment make it overly generous for all but the lowest income enrollees. And higher income enrollees are being charged premiums far below the going rate for private health insurance.

All of these problems are all too real and contributed to this year's $193 million increase in the state's share of TennCare costs that is, in turn, a major contributor to the state's overall fiscal crisis. But all of these problems are fixable; and given the zeal that Lapp has brought to his position, there's no reason why they can't be fixed in relatively short order.

True, a recent U. S. Supreme Court decision has cast doubt on the state's ability to impose a residency requirement on eligibility, but Lapp believes his plans for doing so can be justified. Any employee of a company that offers health insurance who purports to be uninsurable is committing fraud, and Lapp says with relish that, "We're going to throw people in jail." Administrative integrity, deductibles, co-pays, and premiums are also all within his purview. "If I could just get the average premium for the non-Medicaid component of our enrollment up to $20 a month from $6 at present, that would be worth $120 million a year," Lapp says.

The popular misconception persists that TennCare is just a program for the indigent. But only slightly over half of its enrollees are Medicaid-eligible for whom no premium can be charged. The balance are adults whose employers didn't offer health insurance and who got in before the eligibility window closed on them in 1995, children of the uninsured for whom the window remains open, and 113,000 uninsurable.

It's true that this number has risen by 5,000 just since the beginning of this year. It also needs to be acknowledged that people like Kathy now have a recourse that wasn't available at the time when Lapp himself enrolled in TennCare. Under a law enacted by Congress in 1996, anyone with employer coverage who loses or changes their job is entitled to get new coverage without any restrictions for pre-existing conditions. However, the window for doing so only stays open for 63 days.

According to insurance broker John Worden of Campbell Worden Associates, not many affected people are aware of it until it's too late to act. "It's relatively new, and a lot of human resources people don't understand it. Moreover, there's no incentive or requirement for an employer to inform people who are terminated," Worden says. Moreover, "For lower income people with any kind of a problem, the cost is prohibitive," Worden says. "You're looking at $300 to $500 a month for individuals." This compares to the $217 a month that Kathy was paying for her COBRA and the $118 a month for TennCare.

Lapp insists that closing the TennCare uninsurable window will only be temporary. "We'll keep it closed for less than a year until we get things fixed," he says. But even a day, let alone a year, is too long for people like Kathy to go without health insurance.

The state recognized this well before TennCare's inception in 1994. Under a predecessor program called TCHIP, uninsurables—and uninsurables alone—could qualify for coverage in a high-risk pool that was funded partly by insurance companies and partly by the state. But half the cost was recaptured from participants at premium levels on a sliding scale depending on their income. For Kathy, that would have meant premiums, deductibles, and co-pays more nearly in line with her COBRA coverage than more highly subsidized TennCare rates.

Lapp's goal should be to expedite getting TennCare on a sounder footing, and the state should stop trying to throw out the baby with the bathwater.